Israeli Economic Growth Accelerates as Exports Climb

Israel’s economy expanded an annualized 2.8 percent in the first quarter, with growth in exports and private consumption partly offset by declining investment.

First-quarter growth accelerated from 2.6 percent in the previous three months, the Jerusalem-based Central Bureau of Statistics said in an e-mailed statement today. The median estimate of 10 economists surveyed by Bloomberg was for growth of 2.8 percent.

“It’s a mixed result,” said Modi Shafrir, chief economist at Tel Aviv-based I.L.S. Brokers Ltd. “While the pace of growth has accelerated relative to the fourth quarter, it is still moderate.”

The relatively slow growth, compared with 3.2 percent in 2012, drove down inflation to a six-year low of 0.8 percent in April. To tame the shekel and bolster exports, which make up 40 percent of Israel’s economic output, the Bank of Israel cut its benchmark interest rate by a quarter-point to 1.5 percent in an unscheduled decision on May 13.

Policy makers, led by Governor Stanley Fischer, have gradually reduced the rate from 3.25 percent in 2011 in an effort to shore up the economy amid the European debt crisis.

Israel’s economy will probably expand 3.8 percent in 2013, including first-time natural gas production, the Bank of Israel said in March. Excluding gas output, the growth outlook is 2.8 percent, compared with 3.2 percent last year, it said.

Exports rose an annualized 13.5 percent in the first quarter, after shrinking 6.5 percent in the fourth, while imports advanced 2.5 percent, after dropping 14.9 percent, the bureau said.

Investment in fixed capital, such as machinery and buildings, declined for a fourth consecutive quarter, dropping 14.7 percent, after falling 11 percent in the previous quarter.

Growth, excluding natural gas production, will probably slow in the second quarter, Shafrir said.

“We still see a relatively decent chance for another rate cut in the coming months,” he said.

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